We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

In earlier posts, we discussed rulings by two bankruptcy courts, one in Delaware and one in Virginia, in which the potential chilling effect of secured creditor credit bidding at a Bankruptcy Code § 363 asset sale was determined to be sufficient to support a “for cause” limitation on the secured creditor’s credit bid right. A bankruptcy court in Tennessee has now weighed in on this important, and contentious, issue.

In a memorandum opinion dated July 10, 2014, in the chapter 11 case In re RML Development, Inc., dba Pinetree Place Apartments dba Raintree Apartments, Case No. 13-29244, the United States Bankruptcy Court for the Western District of Tennessee analyzed the secured creditor’s credit bid rights under Bankruptcy Code § 363(k). While agreeing with the referenced Delaware and Virginia bankruptcy court rulings that there is no absolute right to credit bid, the Western District of Tennessee bankruptcy court expressly departed from those rulings when it came to the question of what constitutes “cause” to modify or deny the credit bid right:

[T]his court is not prepared to go as far as some of these courts and hold that the mere “chilling” of third party bids is sufficient cause to justify modifying or denying a secured creditor’s rights. The modification or denial of credit bid rights for cause under § 363(k) should be an extraordinary exception that is used only upon equitable considerations (e.g., competing claims, collusion, or other fraudulent or bad faith acts). This court is convinced that, where a creditor holds an uncontested secured claim, it should ordinarily be permitted to bid at a § 363 sale of its collateral regardless of its intrinsic impact on other bidding. Id., FN 11

This is a welcome ruling for secured creditors and, from their perspective, will hopefully slow or reverse the apparent momentum toward a more relaxed “for cause” standard generated by the earlier Delaware and Virginia rulings.

Compare jurisdictions:Arbitration

In common with many in-house lawyers, I have limited access to (and a limited budget for) resources and rely on receiving know-how from friends and contacts in private practice. Lexology is great as it provides a daily email with the headlines in all the areas of law that I am interested in (which are all relevant to me, as I was able to choose which areas I was interested in at registration), with links to articles from a wide variety of sources.

I tend to scroll through the daily email when I am having my lunch, reading the headlines and descriptions of the articles, and click on any items that are of interest to me - that way, I feel like I am kept 'in the loop' with legal developments.

In addition to the daily email, I find the articles themselves very helpful - they set out the legal principle but most importantly, they 'boil it down' to the practical implications. When I am doing legal research, I also find the archive search function very helpful.

I have recommended the service to quite a few friends who have also found it very helpful."